New Telefnica Chief Alierta Sets His Goals

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Madrid, Spain-César Alierta, the new chairman of the major European phone company Telefónica España, is bent on completing a series of projects left behind by predecessor Juan Villalonga.

According to sources both within and outside of the company, Alierta has indicated that he would accomplish what Villalonga had promised but never delivered. One manifestation of that came last week, when the company finalized-and increased-its investment commitment to Dutch production company, Endemol Entertainment Holding NV, originator of the hit series Big Brother. Through a stock swap agreement, Telefónica now holds 99.2 percent of that company.

Alierta also is intent on completing the merger between Telefónica's Internet-service provider, Terra Networks, and U.S.-based ISP, Lycos Inc. He must also to further develop an alliance with the huge German media conglomerate Bertelsmann AG.

In the cases of both Lycos and Endemol, Villalonga has been much criticized for having paid much more than the companies were worth.

"[Villalonga] doesn't have stable alliances internationally for Telefónica that guarantee the company's shareholders [good returns].Alierta will have to focus on that," said an industry analyst.

Alierta has not unveiled his plans for the company's various media holdings, which include cable investments in Latin America.

Villalonga had hired away top executives from Galaxy Latin America and Brazil's Globo Cabo S.A. to oversee Telefónica's Latino media ventures, and those executives had ambitious plans to further involve the company in broadcast-TV and program production.

Despite that, Villalonga's reputation in Spain is one of an executive who doesn't pay much attention to cable TV, or the media in general.

"He acted as if Telefónica didn't have a license to offer cable service all over Spain, but it has," said a Telefónica source who requested anonymity. "It is not operating anywhere."

Telefónica Cable, the telco's cable-TV subsidiary, has been testing services, conducting trials and buying equipment, another company source said. But it hasn't launched commercial cable service anywhere in Spain.

Despite all the criticism, Villalonga did oversee changes at Spain's largest company. Telefónica stock rose 440 percent during his four-year tenure.

And he turned what was largely a domestic Spanish company into an international powerhouse in telecommunications and cable TV. Today, Villalonga has no involvement with the company, although he faces potential criminal charges resulting from insider trading in Telefónica stock.

Villalonga has said his resignation was due to "political pressure" from the same Spanish government that appointed him chairman in 1996. He and the country's conservative president, José Aznar, were close friends since childhood.

Their relationship soured, however, after Villalonga became the nucleus of the stock scandal. The center of that controversy is a system Villalonga created that reportedly benefited 100 of Telefónica's directors-including the chairman himself-by more than $407 million.

Aznar was accused of favoring his friend. To make matters worse, Villalonga did not give in to government pressure to give up his own $17 million in stock options.

The man who replaces him, Alierta, is a lawyer by training who holds an master's in business administration from Columbia University in New York He was a director of both Telefónica and Terra. Networks.

Until his appointment as Telefónica's chairman, he was chairman of Tabacalera (now called Altadis), a tobacco company he privatized in 1998.

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